There’s a real change happening right now in the venture capital healthcare investment world. In a recent article on NPR they highlight one piece of the change that’s happening with VC investment in healthcare:
The share of venture dollars flowing to seed and early-stage investments in biotechnology and medical devices has plummeted since 2007, when investors pumped $3.6 billion into 332 deals in which a price was disclosed, according to data compiled for Kaiser Health News by FactSet Research Systems. Overall venture investing declined by nearly one-third as the economic recession set in.
Many might look at this and say that this is a bad thing for healthcare. I think this this is a good thing for healthcare. One reason why is described in the same article:
“If you come in with [a device] that’s 10 percent better and twice as expensive, it’s hard to get anyone to care,” said Bryan Roberts, a Palo Alto, Calif.-based venture capitalist at Venrock, a Silicon Valley company that invests in firms working on health services, medical devices and drugs.
I think it’s healthy that we’re no longer investing twice as much money in something that delivers only partially better care. Sure, we still need companies innovating and looking at how that 10 percent better care can have an extra 0 on the end and be 100% better care.
Plus, I think we’re seeing a shift in healthcare investment into a large number of smaller companies who can innovate as opposed to larger sums of money into medical device and biotech companies. In some ways we’re seeing the costs associated with a startup company in healthcare starting to come down the way they did in the IT side of things.